There was a time when “start up” literally meant “business that is beginning” – but those days are long gone. It’s difficult to even get a consensus on a definition of what is and isn’t considered a “start up” in 2016 – but it’s pretty clear that you have to conform to a few rules:
1. You need to be doing something in tech. Fledgling resource and property management firms don’t seem to fall under the hip “start up” category. You have to be sexy. According to one super hep cat, being a start up is “a state of mind”¹.
Perhaps worth noting that said hep cat, who is referred to in the quoted article as the CEO of one of the “Hottest US Start ups of 2013”, shut down her start up in 2015 without ever turning a profit because their business model was inherently flawed. Maybe being a start up should also be about, I don’t know, running a sustainable business that turns a profit?
2. You need to be young. A 50 year old at the helm of a start up? Inconceivable!² Even though studies are showing that millennials are starting businesses at literally a slower rate than any other generation³.
3.You need to be capable of going from idea to billion dollar valuation in 24 months or less. On the upside, this valuation can be based on literally nothing – basing a valuation on “assets” and “earnings” is so retro.
Only 8 Percent of start ups last beyond the 3 year mark⁴.
And yet, it’s all the media and events space in Australia appear to be interested in.
Every time you turn around, there’s another “start up conference/seminar/workshop”. Another article on how to be “disruptive” (spoiler: disruption, in this context, is always an app.). Another start up incubator that’s going to hatch the next Unicorn Egg.
The story is so clichéd, it’s almost become trite:
Entrepreneur flitters from venture to venture with little success. One day, he has THE idea. Pitches to investors, millions rain from the VC-sky. 24 months later he gets bought out / IPOs. Instant Billionaire.
The problem with this story is not that it’s not true – of course, there are people who’ve had this exact experience – but rather that it’s unachievable for most people and certainly unreplicable. And yet, it’s being shoved down our throats over and over again as the model of success.
Look, there’s nothing wrong with enjoying hearing the story of the person whose hard work was finally paid out for by the Universe when they were in the right place at the right time and accidentally hit it big – but the reality is, most businesses don’t grow like this.
These stories are the stories of outliers. And the odds clearly state you’re unlikely to be one of them.
Start Up Fetish Myths
Myth 1: The Idea is Everything
We’ve all met someone with the “Greatest Business Idea” ever – whose still in their day job, afraid to get started. But whose idea will definitely make a billion dollars…when they get around to starting.
The reality is – Ideas are a dime a dozen.
I’ve seen the greatest business ideas in the world crash and burn – and ideas you would SWEAR could never make money, make millions.
That’s not to say the idea – the product – isn’t important. Of course it is. I watched a couple of years ago as frozen yoghurt shops popped up all over Melbourne … only to be offered for sale half way through winter.
You need to have a plan. And it doesn’t hurt if it’s well thought out.
But a mediocre idea, well implemented will out play an amazing idea poorly implemented (or not implemented), any day of the week.
I understand that when they’re starting out, people want to believe that the sexiest idea wins. But that’s simply not true.
Case in point: there are a hell of a lot more successful accounting firms than there are high tech start ups.
In fact, if you check out your BRW rich list⁵, you’ll see that the businesses on there are predominantly in decidedly unsexy industries (finance, manufacturing, mining, property development) – and most have been in business for 25 years plus.
Because real businesses take time and commitment to build.
If you’re looking to get rich quick, may I suggest the casino.
Myth 2: Venture Capital Is The Same As Revenue!
When I was in my 20s and really poor and I couldn’t afford my rent, I used to scrounge around my house for things to sell. Old clocks, CDs, instruments – I’d take them down to the second hand shop and sell them for cash.
The problem was, I could only sell them once. And as time went on, I had fewer and fewer things left in my house that I could sell.
Venture Capital is not recurring revenue. Sure, funded start ups might see a big million-dollar injection of cash, typically for equity in the business – but when that’s gone, where does the money come from?
Staff, suppliers, overheads – these things need to be paid constantly. They’re not one-off payments. A business is a machine that’s fuelled by cash – if it can’t turn said cash into more cash, you’ll quickly encounter a problem.
Venture Capital is not sales. Sales is sales. And one of the things that drives me forever crazy is the ongoing rhetoric that there’s some other point to business than to sell something.
A “business” that is “pre revenue” isn’t a business. It’s a cute hobby you have that may or may not make money one day.
Some clients of mine – who’ve grown their business to high 6 figures in revenue with next to no staff in around 2 years – went to a pitch event recently.
They came away confused and perplexed, because the person who “won” the event had not only no business – but no plans to create revenue from the great big idea he’d put together.
I understood their confusion – but having spent so much time over the last few years around people involved in VC and the start up scene, it didn’t surprise me.
There’s a huge bubble in this space – and investors and start up founders ignore it at their own peril.
Myth 3: Start Up. Cash In. Sell Out. Bro Down.
There’s nothing wrong with wanting to make a lot of money. And it’s okay if that’s your number one outcome for your business.
But the narrative of start up mythology is almost always focused around people whose exclusive mission is to grow as big as possible as quickly as possible and to sell out for as much as possible.
It ignores the thousands of small businesses who grow slowly and sustainably. They don’t want venture capital. They’re not interested in investors. They never want to IPO. They see their business as a legacy they’ll pass on to their children.
They are purpose driven rather than money driven.
That means that sometimes they make decisions other people would consider crazy – they turn down deals that would make them a lot of money quickly. They choose not to align themselves with partners or suppliers they don’t feel resonate with their mission.
Personally, I find the whole “business that isn’t a business yet but really honestly will be one day when it takes over the world, promise, just give us a million dollars to figure it out” start up thing dull.
I’m interested in the people who not only had a great idea, but who’ve spent the last few years actually building a business around it. The people who’ve faced the ups and downs of running a business – of learning about marketing and sales, management and delivery.
The people who’ve bootstrapped – who haven’t been handed millions of dollars for nothing, but rather, who’ve had to make every dollar count. Who’ve had to get creative about how they expand and build their business.
The Entrepreneurs The Media
Aren’t Interested In
I’m constantly starving for the stories and insights of real business people. The ones who’ve gone out and done it themselves – and by “done it”, I mean – have created actual businesses.
They haven’t been focused on winning awards and getting double-page spreads in magazines. They’ve been too busy making actual sales and growing a sustainable business.
They’re not wunderkinds.
They’re not savants.
They’re people who have focused on their craft – who have become excellent at what they do through long-term iterative process.
They’re people who are making changes in their industries, slowly and sustainably.
They’re just people who’ve made mistakes, who’ve suffered defeats and setbacks – but who are still going.
These are the people whose stories are so often untold, because their businesses aren’t “sexy”. Because the media is generally uninterested in stories of people who work really, really hard to get good at what they do and whose success is a trajectory of decades.
These are the people whose businesses may never reach the dizzying and mythological heights of the start up – but who’ll still be around in 10 years, 20 years, 30 years.
These are the people who inspire me. The people whose stories I live for.
These are the people we serve for whom we’re developing tools, content and events in 2017.
These are the people who I suspect, if you’ve read this far, are just like you.
These are The 8 Percent.
I see you, not start ups.
I see the late nights, the cashflow stress, your constant striving to become more and do better.
I see the frustration – the years spent honing your craft, sharpening your sword, becoming expert at topics you never wanted to know about. Because that’s what’s needed to build and to keep everything moving.
I see you paying the bills. Managing the staff. Taking responsibility for everything – because that’s who you are.
I see the breakdowns and the burnout – the result of pushing too hard and putting yourself last.
I see your seemingly endless toil – not for the applause, but for the mission.
I see you.
You may never be fetishised and lauded by others – your story is one of grit and determination and hard work and excellence and these things are decidedly uninteresting to the general public – but you have my full attention, admiration and respect.
References:
1. http://www.forbes.com/sites/natalierobehmed/2013/12/16/what-is-a-startup/#635272534c63
2. (Old Person Joke)
4. https://s3.amazonaws.com/startupcompass-public/StartupGenomeReport2_Why_Startups_Fail_v2.pdf
5. http://www.afr.com/leadership/brw-lists/brw- rich-200- list-2016- 20160526-gp4ejn[/vc_column_text][/vc_column][/vc_row]
Yep that’s me. Especially the burn out. I’ve worked my guts out over ten years. Always falling forward and getting much much better.
With what I know now if I were starting again it would be a cinch. The thing is I can’t start again I can only keep going.
I don’t know I’d you could help me or not but is like to find out.
Hey Stuart,
Thanks for your comment! Had a quick look at your website and it’s really interesting – if you want to discuss further, please pop an email to:
support@strategicanarchy.com
Happy to talk further!
This all seems so biased to me, I mean, as I understand it, some of the biggest companies (Uber, Airbnb, Amazon) don’t actually make ‘revenue’ in the way you were talking about. The money the owners and employees make are from the investors and the company doesn’t have to make a profit for it to be successful.
And I don’t see why it has to be so one side or the other. Why can’t a start-up also focus on building a sound business model and grow slowly? I know lots of start-ups won’t do this as correctly or as effectively as businesses that have been around for 10-30 years, but that’s pretty damn obvious isn’t it? Is anyone really going to try and argue that an accounting firm should be compared to a start-up that’s based on an idea they are passionate about?
Of course everyone needs their taxes done. Fantastic. What fun. And I am glad that some firms are so good at doing our taxes that they get on rich lists and can be up there, fighting against the guys that help us with our workplace contracts and with those guys that help us buy our houses.
There is a reason why start-ups are so favorably focused on. Because they are often stories of people from different walks of life, who can be quirky or considered strange, who have gone on to change the business world dramatically. We surely can’t just have slow walkers and steady growers, we need people who can come out of nowhere and shake things up. It keeps us all competitive.
Just my two cents anyway.
Given it’s an opinion piece, it would be ridiculous to deny that this is biased – of course it is. I wasn’t aiming for objectivity – I was expressing my personal opinion (“Why I’M bored”).
If you honestly believe that a company “doesn’t have to make a profit for it to be successful” – then you don’t understand the basic foundations of how business works.
How long do you think investments last when investors don’t see a return? If your entire money-making plan is to get people to invest, then profit is even more important than if you’re wholly owned by a single person.
“Is anyone really going to try and argue that an accounting firm should be compared to a start-up that’s based on an idea they are passionate about”
a) accountants tend to be VERY passionate about their businesses. Just because you find accounting boring, that doesn’t mean it’s not someones passion business.
b) passion and money don’t have to be mutually exclusive – and in business, they’d better not be.